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Labour’s Rental Reforms: The Good, The Bad and The Ugly

Ed Miliband has announced Labour’s plans to reform the private rented sector if they win the next election. He sees scrapping letting agent fees, stricter controls over rent increases and standard three-year tenancies as the best way to ‘deliver a fairer deal to renters’. Is he right?

Scrapping letting agent fees: The Good

Every landlord and tenant will be better off without them. Traditional letting agent fees are hugely excessive and full of hidden charges. This was precisely the problem that Rentify was created to solve! It’s very clear to us that comprehensive letting services and property management need not cost the earth.

Controls for rent increases: The Bad

The plan is that landlords and tenants would agree initial rents based on market value. Once the tenancy begins, a review could only be conducted once a year. When these reviews come round, there will be an ‘upper ceiling’ for any increase. This could be based on average rent rises, inflation or a combination of both.

There are a number of problems with this. It only makes sense with longer term tenancies (see below) but mortgage lenders will often limit maximum tenancy length to 12 months as they claim it gives greater protection if the landlord defaults (as they can recover the property more quickly). If the law makes lenders provide longer tenancies, surely rates will go up, landlords’ costs will go up and the market will dictate that rents go up anyway.

Although Mr. Miliband claims that rents have increased 13% since 2010, other figures show they have been increasing below the rate of inflation and have now slowed even more. Also, rent review is regulated as it stands: a Section 13 notice to increase rent can only be issued every 12 months, a landlord cannot simply raise the rent when they want and tenants can refer any increases to a rent assessment committee for review. If the upper ceiling cap is too stringent, it will become unprofitable to keep properties in the best condition, reducing quality. Other landlords will leave the market and market values will increase anyway due to decreased supply.

This leads onto a most important point: the proposals do not address the need for more housing. As long as Mr. Miliband bases his controls on market value, they will not have much effect as demand for housing is so significantly outstripping supply.

Three year tenancies: The Ugly

‘Ugly’ may be too strong a word for this proposal but, hey, I’ve got a theme here. It may be on the right track but it’s messy and raises serious questions. The idea is that tenancies would automatically run for three years. There will be a six month probationary period – like with current ASTs – after which the landlord can remove the tenant if they have broken the terms of the agreement. Following that, a landlord will only be allowed to remove a tenant if they break the agreement (e.g. rent arrears, anti-social behaviour etc.) or if the landlord wishes to sell or move into the property. This would mean the end of the Section 21 notice and no-fault possession. The tenant can choose to leave at any stage with one month’s notice.

The UK certainly needs greater flexibility on long term contracts. But the key word is ‘flexibility’. Why should three years be standard when many will want shorter tenancies? The BBC states that ‘students and business people on flexible contracts would still be able to request shorter tenancies’. This is hardly a comprehensive answer. Tenants can leave when they want. Why shouldn’t landlords be allowed to offer a shorter term if, for example, they are planning renovations? We need more clarification. Also, there is the issue of the length of tenancy in mortgage lenders’ terms, as discussed above. Will a standard three year fixed term even be enforceable?

So Labour’s rental reforms are a mixed bag. It is important to note again that they fail to address the issue of building more homes, which is the real solution to the UK’s housing crisis. What do you think? Please let us know in the comments section, or fill out our special survey designed to let you put your side of the story across.

7 thoughts on “Labour’s Rental Reforms: The Good, The Bad and The Ugly”

Another Headline grabbing statement from this stupid man
Does he not realise that very few landlords will want to rent for three years,when a tenant can give one months notice after six months.
There is no mention of whether landlords could sell if their costs went up eg mortgage costs.
Due to less supply rents will go up,howether abolishing the state agents fees will most probably increase the amount agents will charge landlords for renting the property which again will eventually push up rents still further.
There are many more reasons why more people rent today besides the shortage of homes and high prices.
More young people who go to university than a generation ago increase demand,once they leave university,they like their independence and often move out of their parental home soon after they leave.To get jobs they might also have to move away.This certainly happened with one of my children.
Also rents are cheap if you look at all the other costs of owning a property and in the last few years it has definitely been cheaper renting than buying,the only danger is if there is a sudden spike in house prices,again one of my children also rented for a year prior to buying.The other thing is that often people can rent in an area that they could never afford to buy in.

I am a private landlord with over 20 buy to lets, if labour come in next year then they will slowly wreck them. I have already stopped allowing DSS tenants after various issues. I for one will be voting conservative next year

How about a fairer deal for Landlords, in regards to bad tenants, it seems that the landlord
must abide by the rules but the bad tenant can just laugh at the law, incur big cost on the landlord
trying to gain possession, unpaid rent, putting right damage to the property etc. I have had first hand experience of bad tenants
I think Mr Miliband does not live in the real world, as far as I can see Mr Miliband is much more interested in
getting elected as Prime Minister.
Regards
Michael

We’ve have had our first rental property since November last year, we rented it ourselves and had to abide by the law as the tenant stopped paying rent halfway through her 6 month tenancy. And then she had a party for her birthday with over 40 guests in a 2 bed terrace house.

The neighbours had my phone number and I had asked them to ring me with any problems at the address and she left it for 2 months before contacting me by which time we had over £1000 worth of damage and half the street majorly annoyed with the tenants at our house, due to unsociable behaviour at the address.

The start of the nuisance coincided with us issuing a section 21 notice to her that we would not be extending her tenancy, after the initial fixed 6 months. Luckily enough, (I had the section 8 typed up and ready to issue with no sign of the tenant.) her parents came and removed her possessions from the property for us after the party that caused the damage, They were both mortified and she has not been seen since at the property, on the downside we have no forwarding address to claim back either the rent or the cost of the damages from her. As both of her parents claim she is not living with either of them now.

There must be some way of making it easier to reclaim monies from bad tenants? Also this girl was working when she signed the tenancy, shortly after went onto benefits, which was when she stopped paying rent, she had housing benefit and did not pay it to us. We did find receipts for things she had bought in the house while we were cleaning up, which were not essential items by any means.

It feels like the tenants have all the rights, luckily we now have a lovely young couple in who have even been making me tea and coffee while I been working my way though the snagging list since they moved in and trying to feed me.

Protection for the tenant? What about the landlord? How many of us have had to go through the (slow) motions of getting a tenant out of a property for non-payment of rent to find the process of serving notice, county court, bailiff, is a 3 month procedure. Five months rental income can be lost!

when I had bad tenant I found out there isn’t much I can do apart from waiting and spending money….tenant just had a laugh and got free help from council….housing agreement should be trated as phone, loans agreement….

Why is Miliband getting away with the (seemingly) unfounded claims that rents have risen 13% since 2010, when they have been shown by Office of National Statistics (ONS) that across England since March 2005 (9 years) to 2014 rents increased by 9.5%.

In London this figure was closer to 12.5%…is this what Mr Miliband is referring to, I can’t find any source on his claims!